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Monday, May 31, 2010

Increase your take-hope pay with Advance Earned Income Tax Credit Payments

If you expect to be eligible for the EIC this year (2010) and have a qualifying child, you can choose to get payments of the EIC in your paycheck now instead of waiting to get your EIC all at once in 2011 when you file your tax return for the year 2010. These payments are called Advance EIC payments.

To be eligible receive Advance EIC, you must be eligible for Earned Income Tax Credit payments for 2010, you must have at least one qualifying child, and you must expect that your 2010 earned income and adjusted gross income (AGI) will each be less than $35,535 ($40,545 if you expect to file a joint return for 2010).

You may get only part of your EIC during the year in advance payments - no more than $1,830 throughout 2010. You will get the rest of any EIC you are entitled to when you file your 2010 tax return and claim the EIC. You will get the rest of the EIC you are entitled to when you file your tax return in 2011 and claim the EIC.

How do you begin receiving Advance EIC through your paycheck? Fill out Form W-5 and give it to your employer. You may have only one Form W-5 in effect at one time. If you and your spouse are both employed, you should file separate Forms W-5. This Form W-5 expires on December 31, 2010. If you are eligible to get advance EIC payments for 2011, you must file a new Form W-5 next year.

If you receive advance payments of EIC in 2010, you must file a 2010 tax return (even if you would not otherwise have to file) to report the payments and claim any additional EIC. Box 9 of your Form W-2 will show the amount you received. See the instructions for Form 1040 or Form 1040A for the line number on which you report advance payments of EIC.

If you receive advance payments of EIC in 2010, and you later find out that you are not eligible for some or all of them, you still must report them on your tax return.

Email me today for more information or a copy of Form W-5. Form W-5 is also available at http://www.irs.gov/pub/irs-pdf/fw5.pdf